Question No- 6 Varner Inc. and King Inc. have the following operating data: Marks-5+5+5=15 Varner King Sales $600,000 360,000 $300,000 Variable costs 120,000 Contribution margin $180,000 120,000 $240,000 Fixed costs 80,000 Income from operations $ 60,000 $160.000 Required: a) Compute the operating leverage for Varner Inc. and King Inc. b) How much would income from operations increase for each company if the sales of each increased by 20%? c) Why is there a difference in the increase in income from operations for the two companies? Explain. Question No-7 Marks-10 The CVP income statements shown below are available for Armstrong Company and Contador Company Armstrong Co. $500,000 240,000 Contador Co. Sales Variable costs $500,000 50,000 Contribution margin Fixed costs 260,000 160,000 450,000 350,000 Net income $100,000 $100,000 Required: Assuming that sales revenue increases by 10%, prepare income statement for each company. Discuss how the cost structure of these two companies affects their profitability and which cost structure is better? Marks-10 Question-8 a) Adam is confused. Because he does not understand why rent of his apartment is a fixed cost and whereas rent on a rental truck is a mixed cost. Explain the difference to Adam. b) Distinguish between managerial and financial accounting as to (a) primary users of reports, (b) types and frequency of reports, and (c) purpose of reports.

Answer ALL questions 1. Frank Henry is working as a top-level manager of a reputed corporation for the past five years. He has recently taken extra monetary benefits from the corporation, which means he has placed his personal goals ahead of the corporation's goals (i.e., stock price maximization). The shareholders of the corporation worried about the future prospects of the corporation. What actions can you suggest as a consultant to the shareholders so that the manager will act on behalf of the shareholders, and pursue the shareholders' wealth maximization goal? Besides, as a consultant, suggests some actions for the managers which they should take to maximize the shareholders' wealth. Explain (6 marks) 2. Fazana Islam just retired from her job and received a pension amount of BOT 50,00,000 from her employer. She wants to save the whole amount as fixed deposits. For that reason, she recently visited two banks to collect Information about their fixed deposits scheme. Both banks offered her a 6 percent interest rate. However, one bank interest rate is compounded semiannually, and another bank's interest rate is compounded monthly. In which bank, in your opinion, Ms. Istam should save her money? What would you suggest if one bank offered a simple interest rate of 6 percent and another bank offered a compound interest rate of 6 percent? Be specific in your answer. (6 marks) 3. Rakibul Alam invests BDT 200,000 today at 11 percent interest compounded semiannually. If he plans to sell the investment when its value reaches BDT 505,000, for how long will his money have to be invested? Interpret your answer. 17 marks) 4. Eti Biswas wants to start her own business in 9 years, and she plans to save funds to invest in the business. She has determined that she can save BDT 12,000 per year for 9 years at 9 percent interest. If the first BDT 12,000 deposit isn't made until one year from today, how much money will she have in 9 years when she starts her business? Interpret your answer. (8 marks) 5. You can deposit BDT 10,000 into an account paying 9% annual interest either today or exactly 10 years from today. How much better off will you be at the end of 40 years if you decide to make the initial deposit today rather than 10 years from today? Show calculation and interpret your answer. (8 marks) Page 1 of 1